Verizon has remained cautious in its response to the massive data breach at Yahoo, with analysts noting a company statement did not contain a line confirming its commitment to completing the $4.8bn deal to buy the internet pioneer’s core business, unveiled in July.
The communications giant said it was only informed earlier this week of the huge security failure at Yahoo, despite having done months of due diligence ahead of its decision to buy.
The hacking of 500m Yahoo accounts — thought to be the biggest ever data security breach — occurred in 2014 but was only made public on Thursday.
In a statement released on Thursday night, the telecoms group said: “Within the last few days we were notified of Yahoo’s security incident . . . but we otherwise have limited information and understanding of the impact.”
Verizon declined to make any further comment.
“The companies negotiated over the deal for months, and one assumes Verizon did pretty extensive due diligence,” said Jonathan Chaplin, analyst at New Street Research.
“I can’t imagine why this wouldn’t have been disclosed. It is hard to believe that Yahoo management believed that it wasn’t material.”
Mr Chaplin said Verizon “may well have the right to walk away” from the deal, citing a material adverse change clause, although he predicted the deal would probably still go ahead.
“There may have to be an adjustment to the price paid, though,” he said.
Verizon plans to merge Yahoo with AOL, which it bought for $4.4bn last year, to build a credible “number three” in digital advertising behind Google and Facebook — believing that two fading internet pioneers can together succeed where individually they failed.
“Are we going to challenge Google and Facebook? I just say, look, we’re planning on being a significant player here. The market is going to grow exponentially,” said Verizon’s chief executive, Lowell McAdam, when he unveiled the deal in July.
Google and Facebook together control more than 50 per cent of the US digital advertising market, according to eMarketer, a research group, while AOL and Yahoo combined have roughly 6 per cent.
Richard Windsor, an analyst at Edison Research, said the security breach drew attention to the fact that Verizon had bought “second rate” assets.
He said: “The assets that it has purchased are second rate in the eyes of users who prefer the services of Google and Facebook — which means that Verizon has a lot of work to do to make these assets more appealing.”
Shares in Yahoo fell 1.65 per cent in pre-market trading in New York, giving the company a market capitalisation of $42bn, the vast majority of which is assigned to its stake in Alibaba, the Chinese e-commerce platform.
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